Bitcoin futures soar amid frenzy over virtual currency

CHICAGO (AP) — Bitcoin's debut on a major U.S. exchange is a hit so far, with the price of the first-ever futures contract for the virtual currency rising 16 percent.

The futures contract that expires in January was up $2,440 to $17,900 this afternoon on the Chicago Board Options Exchange. Trading began Sunday, and the price rose as high as $18,850, according to data from the CBOE.

The CBOE futures don't involve actual bitcoin. They allow investors to make bets on the future direction of bitcoin.

The first session of futures trading fit right in with the frenzy surrounding bitcoin. Traffic to the CBOE website was so heavy right after the start of trading that the site experienced outages. The exchange also halted trading twice Sunday to stem volatility. The exchange operator has rules in place to stop trading after price swings of 10 percent.

Another large futures exchange, the Chicago Mercantile Exchange, will start trading its own futures on Dec. 18 but will use a composite of several bitcoin prices across a handful of exchanges.

The price of a bitcoin has soared since beginning the year below $1,000, hitting a peak of more than $16,858 Dec. 7 on the bitcoin exchange Coindesk. As of 12:30 p.m. CST, it was at $16,510 on Coindesk.

Futures are a type of contract in which a buyer and a seller agree on a price for a particular item to be delivered on a certain date in the future, hence the name.

Futures are available for nearly every type of security but are most famously used in commodities such as wheat, soy, gold, oil, cocoa and, as dramatized in the Eddie Murphy and Dan Aykroyd movie "Trading Places," concentrated frozen orange juice.

The futures signal greater mainstream acceptance of bitcoin but also open up bitcoin to additional market forces. The futures will allow investors to bet that bitcoin's price will go down – a practice known as shorting – which had been very difficult to do.